Grain markets ended the month of April with long eyes – those looking at fields still covered in snow from earlier in the week and traders who are looking at the wet conditions as delay for bullish opportunities.
However, Statistics Canada has put a bearish mood over the market with its 2017 acreage estimate (although some consider their numbers baloney). More specifically, it’s estimated that Canadian farmers will plant a record 22.4 million acres, which is a 10 per cent climb (or 2 million acres more) from 2016 and 7.5 per cent more than the 5-year average.
Regionally-speaking, Alberta and Saskatchewan are owning all of the increase, putting in 870,000 and 1.175 million more acres respectively than they did in 2016 for 12.275 million in Saskatchewan and 6.82 million acres in Alberta. Conversely, Manitoba canola acres are actually down a bit year-over-year to 3.1 million but soybean and corn acres are up, notably up by 565,000 in beans to an astounding 2.2 million acres (food for thought: in 2012, Manitoba soybean acres were 800,000).
Combine this with Saskatchewan’s similarly-significant hike to 730,000 acres of soybeans, and over 4 million acres of the oilseed getting planted between Quebec and Ontario, nearly 7 million acres of soybeans will get planted in Canada this spring.
On the wheat front, the bulls were a bit disappointed as total Canadian acreage was barely unchanged year-over-year at 23.3 million acres (albeit down 4.4 per cent from the 5-year average). Basically the story in StatsCan’s wheat numbers is that there’s over 1 million acres of durum that are being taken out from last year to 5.15 million acres in 2017, while spring wheat acreage is vaulting up by 1.26 million acres to 16.66 million acres total.
The biggest surprise is in Alberta where spring wheat area is climbing 860,000 or 16 per cent year-over-year to 6.2 million acres. Total Canadian oats acreage is up 20 per cent from last year to 3.42 million (plus 13.6 per cent from the 5-year average) while barley area is expected to fall by eight per cent to 5.88 million acres (minus 12 per cent from five-year average). Rounding out the report, Statscan says that almost 1.5 million less acres of lentils will get seeded this year with almost 4.4 million acres going in (which is actually 20 per cent higher than the five-year average of 3.65 million). Similarly, pea acreage is expected to dip below four million again after last year’s record 4.24 million (this is still five per cent above the five-year average though).
Ultimately, this all comes back to the question of where are these acres coming from? More specifically, StatsCan says that Canadian farmers are going to be planting an additional 2.4 million acres over what they did in 2016. In Quebec and Ontario, almost 675,000 more acres are getting seeded than 2016’s area.
Heading west, 345,000 more acres are getting planted in Manitoba, just 70,000 more in Saskatchewan, but a dubious 1.125 million more acres are supposed to get seeded in Alberta. Overall, it continues to be early in the game for new crop which is why we expect to see more volatility on old crop cash prices versus new crop, and opportunities on the upside shouldn’t be considered baloney.